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Federal Contract Law: Contracting without competition is out of control

By Joseph J. Petrillo

Jan 23, 2003

Joseph J. Petrillo

The most troublesome public contracts aren't those for R&D programs. Folks expect them to run over cost and over budget. After all, estimation is an art, prognostication is a fiction and exaggeration is a successful political strategy. Motive, method and opportunity all come together in this predictably serial crime.

No, the thorniest problems are contracts operating through orders. These include the Federal Supply Schedules of the General Services Administration, governmentwide acquisition contracts, task and delivery order contracts, and indefinite-delivery, indefinite-quantity vehicles. They all have two features in common: It's easy to award a contract, and it's easy to place an order. So what's the problem?

Easy isn't necessarily better, or even good. Quick purchasing is of little use if the government buys the wrong thing at the wrong price. Unfortunately, that's a real possibility because the main reason these contracts are quick and easy is that they limit or eliminate competition between contractors.

The Multiple-Award Schedule program, for example, started as a good way to get discounts on things like filing cabinets and staple removers. Today the schedule program accounts for $21 billion and some very large orders. Schedule procedures for placing orders aren't robust enough for this kind of commerce. Federal agencies sometimes act as if Congress wrote a blank check for this program. Capitol Hill could be waking up.

Congress recently required the Defense Department to issue regulations requiring competition in ordering services under multiple-award contracts. The law kicked in at orders over $100,000, and provided several exceptions.

After a tussle with the Office of Federal Procurement Policy about time-and-material contracting, DOD dutifully issued the regulations. They faithfully track the statutory language. Before placing a schedule order, the contracting officer must solicit as many contractors 'as practicable.' The goal is to generate at least three responses from qualified contractors.

In my view, these changes fall short of what's needed. They only address service contracts, only apply to DOD, and only go as far as the statute requires. Besides, what's the magic about three offers? Maybe the fourth would have been the best one. Congress got no more than it asked for.

Even before DOD issued its new rules, the Federal Acquisition Regulation got some modified coverage for task and delivery order contracts. Agencies had to do a better job of planning, and there was some noodling around at the fringes of the ordering process.

The deeper problem is that both approaches are mired in obsolete ways of thinking. Publicizing contracting opportunities no longer means printing a cryptic announcement in microscopic type. One posting on the Web instantly notifies the world. Solicitation documents of any length can be posted once and downloaded unlimited times. There is no reason not to notify all potential contractors.

The other area where technology offers a solution is transparency. Ordering vehicles constitute a type of stealth procurement. If they exceed $25,000, they are supposed to show up in quarterly statistics. But there is no reason why the awarded orders can't be posted immediately on the Web in the same way as the proposed ones. The public, and the competing contractors, have a right to know promptly who is getting what public business.

Joseph J. Petrillo is a lawyer with the Washington law firm of Petrillo & Powell. E-mail him at jp@petrillopowell.com.